How feasible is it for Milei to implement the proposals he promises to transform Argentina?

Javier Milei has achieved what many thought unlikely some time ago and was elected president of Argentina this Sunday. Now comes his biggest challenge: governing without majorities a country in crisis that he promised to revive..

This libertarian economist who burst into Argentine politics just two years ago with an anti-system speech, triumphed in the presidential elections with 55.7% of the vote, compared to 44.3% for the ruling Peronist candidate Sergio Massa, with 99% of the counts completed.

“Today the reconstruction of Argentina begins”Milei said this in his victory speech on Sunday evening.

Argentina is experiencing one of its worst economic and social moments since it regained democracy four decades ago, a key factor why Milei’s message against “political caste” attracted so many frustrated voters.

Argentina’s president-elect proposed radical changes, ranging from dollarizing the economy and closing the Central Bank to reducing the role of the state in society and privatizing state-owned companies.

But several experts expect Milei’s election platform will clash with the system of checks and balances of Argentina’s democracy, because the next president will not have a majority in Congress and will even have to negotiate with rivals he vilified in the campaign.

“Milei has a structural weakness to advance his agenda in the legislature. And in a federal country like Argentina, where governors have extraordinary weight, there is not a single governor from their party,” says Argentine political scientist Sergio Berensztein.

“We are dealing with a president who will have enormous weaknesses,” Berensztein told BBC Mundo.

“The big challenge”

Milei, who is 53 years old and describes himself as an “anarcho-capitalist,” has said his goal is to right Argentina’s course so that the country becomes a thriving power again.

“Today we return to the path that made this country great (and) once again embrace the ideas of freedom,” he said in his first speech after being elected president.

But the country has not seen a medium-term political consensus recently. AND The confrontation between the ruling party and the opposition has become a norm which, in turn, has increased instability and deterioration of the economy..

Argentina today has more than 18 million people or 40% of its total population living in poverty, as well as an annual inflation rate of 143% in the past twelve months through October, according to official figures.

In this context, Argentines have decided to entrust the government to a candidate whose anti-system speech draws comparisons with the former far-right Brazilian president Jair Bolsonaro or the American Donald Trump, whom he says he admires.

However, Milei’s lack of experience in politics and in executive tasks in the public or private sector calls for “a mystery about their ability to make decisions”warns Berensztein.

The president-elect must advance the reforms he has proposed, such as the abolition of ten of the government’s eighteen ministries or the reduction of public expenditure by 15% of GDP, with a Congress in which no political force will have a majority and Peronism. will be the first minority.

La Libertad Avanza, Milei’s coalition founded just two years ago, will have just 38 deputies in a chamber of 257 members and eight senators out of a total of 72.

For Sunday’s second round, Milei received the support of rivals such as former President Mauricio Macri and former presidential candidate Patricia Bullrich.

But this split their centre-right coalition, Together for Change, which analysts say would at best guarantee the president-elect the support of around a third of deputies and senators.

Milei suggested during the campaign that: If you’re having trouble getting Congress to pass reforms you consider fundamental, you can put them to a plebiscite.

But the Argentine Constitution stipulates that binding popular consultation must also go through Congress before it can be convened.

Milei has also raised the possibility of calling a plebiscite to repeal the law that allowed abortion in 2020, although experts disagree on whether that would be constitutional as the norm is criminal.

Questions have also been raised about Milei’s idea to decentralize the education system by giving education vouchers or checks to parents so they can choose which school to send their children to, as education is by law dependent on provincial governments.

Even the decrees of necessity and urgency that Milei might resort to as president to promote certain measures would have to be ratified in Congress.

“Milei will not get a majority in either chamber and this is a very specific condition he will face,” agrees Argentine political analyst Rosendo Fraga.

“The political system is Milei’s big challenge”Fraga tells BBC Mundo.

And dollarization?

Even as it overcomes the major political challenges it faces, Milei would encounter practical obstacles in implementing two of his most emblematic proposals, such as the dollarization of the economy and the closure of the Central Bank..

The lack of control over Argentina’s inflation led Milei to claim that the country is “incapable of having currency” and that the Central Bank’s issuance of banknotes represents a “theft” from the population.

But the president-elect has provided few details on how he plans to implement this change.

An important question about Milei’s monetary plan is: How will the economy of a country where dollars are scarce be dollarized?.

“To implement an orderly dollarization it is necessary to have enough dollars to replace the existing pesos and dollarize the financial system,” Claudio Loser, former director of the International Monetary Fund for Latin America, told BBC Mundo.

Milei himself estimated during the campaign that this would cost around $35 billion, which he said could be covered using the Central Bank’s reserves and bonds.

But Loser, like other economists, warns that any dollarization plan will first require correcting the country’s fiscal and monetary policies, curbing inflation, stabilizing the financial system and securing lines of credit to gain confidence.

All this can take at least several months.

“If you want to do it immediately, I expect it will cause a significant shock to the economy,” said Loser, chairman of Centennial Group Latin America, a financial advisory firm based in Washington.

At the same time, even if Milei were to achieve the promised dollarization, Experts doubt whether the Central Bank can be closed completelysince, in addition to a monetary function, this institution also controls the banks active on the Argentine market.

“Like what [Milei] He says that closing the Central Bank so that the government is no longer financed is feasible. Its elimination does not exist in practice in dollarized countries (…) because there is a need to maintain financial discipline and that would be very complicated without a Central Bank or an equivalent bank,” says Loser.

However, according to this Argentinian specialist, the most serious challenge that Milei could face would be a growing conflict as it promotes measures to reduce subsidies and cut public spending.

In Argentina, the battle over the agendas of non-Peronist governments usually takes place on the streets, with trade union and student protests that can become massive.

“Peronism or the eventual opposition to Milei may be better off if he implements fiscal consolidation and pays the political costs,” Berensztein reasons.

“So it is likely that he will reach consensus on some issues,” he adds, “not because the political system is generous, but on the contrary: it is quite selfish and Milei would become a very unpopular president.” (JO)